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Edited Transcript of CCXI.OQ earnings conference call or presentation 10-Aug-20 9:00pm GMT

·51 mins read

Q2 2020 ChemoCentryx Inc Earnings Call Mountain View Aug 11, 2020 (Thomson StreetEvents) -- Edited Transcript of ChemoCentryx Inc earnings conference call or presentation Monday, August 10, 2020 at 9:00:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Susan M. Kanaya ChemoCentryx, Inc. - Executive VP, Chief Financial & Administrative Officer and Secretary * Thomas J. Schall ChemoCentryx, Inc. - Founder, President, CEO & Chairman ================================================================================ Conference Call Participants ================================================================================ * Dae Gon Ha BTIG, LLC, Research Division - VP & Biotechnology Analyst * Edward Andrew Tenthoff Piper Sandler & Co., Research Division - MD & Senior Research Analyst * Edward Patrick White H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst * Joseph Patrick Schwartz SVB Leerink LLC, Research Division - MD of Rare Diseases & Senior Research Analyst * Michelle Lim Gilson Canaccord Genuity Corp., Research Division - Analyst * Steven James Seedhouse Raymond James & Associates, Inc., Research Division - Research Analyst * Tessa Thomas Romero JPMorgan Chase & Co, Research Division - Associate * Yanan Zhu Wells Fargo Securities, LLC, Research Division - Associate Analyst * William S. Slattery Burns McClellan, Inc. - VP ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Good afternoon, and welcome to the ChemoCentryx Second Quarter 2020 Financial Results Conference Call. (Operator Instructions) As a reminder, this conference call will be recorded. I would now like to turn the call over to Bill Slattery of Burns McClellan. Mr. Slattery, please go ahead. -------------------------------------------------------------------------------- William S. Slattery, Burns McClellan, Inc. - VP [2] -------------------------------------------------------------------------------- Thank you. Good afternoon, and welcome to the ChemoCentryx Second Quarter 2020 Financial Results Conference Call. Earlier this afternoon, the company issued a press release providing an overview of its financial results for the second quarter ended June 30, 2020. This press release, along with a few slides that you may find helpful while you listen to this call, are available on the Investor Relations section of the company's website at www.chemocentryx.com. Joining me on the call today is Dr. Thomas Schall, President and Chief Executive Officer of ChemoCentryx, who will review the company's recent business and clinical progress. Following his comments, Susan Kanaya, Executive Vice President, Chief Financial and Administrative Officer of ChemoCentryx, will provide an overview of the company's financial highlights for the second quarter 2020 and before turning the call back over to Tom for closing remarks. During today's call, we will be making certain forward-looking statements, which those of you following the slides can see if you look at Slide 2. These forward-looking statements are based on current information, assumptions and expectations that are subject to change and involve a number of risks and uncertainties that may cause actual results to differ materially from those contained in the forward-looking statements. These risks are described in the company's filings made with the Securities and Exchange Commission, including the company's annual report on Form 10-K filed on March 10, 2020, and its Form 10-Q filed on May 11, 2020. You are cautioned not to place undue reliance on these forward-looking statements, and ChemoCentryx disclaims any obligation to update such statements. In addition, this conference call contains time-sensitive information that is accurate only as of the date of this live broadcast. August 10, 2020. ChemoCentryx undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this live conference call. With that, it is my pleasure to turn the call over to Thomas Schall. Tom? -------------------------------------------------------------------------------- Thomas J. Schall, ChemoCentryx, Inc. - Founder, President, CEO & Chairman [3] -------------------------------------------------------------------------------- Thank you, Bill, and good afternoon to everyone listening. Thank you for joining us on our second quarter 2020 conference call. I will report to you today on what I believe is the impressive progress in executing on the 2020 goals that we laid out for you at the start of the year. But who could have guessed then just how far and fast this pandemic would spread or how long it might last. Our hearts go out to all those affected, to their friends and families and to all the health care workers who are fighting COVID-19. The COVID crisis has affected us all. Here at ChemoCentryx, we were already at or near full enrollment in our current cycle of clinical trials when the full force of the pandemic struck, and we expect to initiate our next cycle of clinical trials next year. We have, therefore, been able to meet most of the milestones that we set out for ourselves this year with relatively little impact, while taking actions to safeguard the health of our employees. We are continuing to make key hires and build out a team ahead of the anticipated commercial launch of avacopan in 2021. The coronavirus has led to heightened awareness of the importance of the body's own defense mechanisms and to the crucial role that the immune system plays. And as you can see from Slide 3, a our discovery and development efforts focus on small molecule therapeutics that target specific chemoattractant receptors. These are the receptors that activate inflammatory cells in autoimmune diseases. We started in renal disease but have leveraged our science into dermatology as well and have now even branched out into a new era in oncology. At the core of it all is the belief that a precise mechanism of action helps to achieve precision medicine. Our drug candidates are designed for anti-inflammatory properties without broad immunosuppression so that the immune system can remain fully focused on its mission to resist illness and disease. This is an important differentiating feature from other currently standard therapies for the diseases in which we, at ChemoCentryx, are developing new medicines. Our lead candidate avacopan selectively targets the C5a receptor, switching off the inappropriate activation of harmful neutrophils in complement driven diseases. In early July, as shown on Slide 4, we submitted our new drug application to the FDA for avacopan in the treatment of patients with ANCA-associated vasculitis. We expect to hear back from the FDA later this quarter with regard to next steps in the FDA review process. We are working also intensively with our partner, Vifor Pharma, as we and they gear up to the potential commercialization of avacopan outside of the U.S. Vifor will pay us royalties in the teens to the mid-20s on net sales outside the United States. Vifor plans to file a marketing approval authorization with the European Medicines Agency by the end of this year, 2020, and we are working closely with them as they prepare their MAA using our core technical document from the FDA preparations as the key source. Our applications to regulatory agencies and our preparations for the anticipated commercialization of avacopan are built upon the key findings in the ADVOCATE pivotal trial. As a reminder, ADVOCATE compared our new targeted therapy, avacopan, against what has been the current standard of care, which contains high and chronic doses of glucocorticoids such as prednisone. We looked at clinical effects in the avacopan therapy group in comparison to the prednisone or steroid therapy group, rather, in a randomized, blinded, controlled worldwide Phase III trial of ANCA vasculitis patients. We believe the advocate findings demonstrate a compelling value proposition in terms avacopan's potential to meet the four major unmet needs of ANCA vasculitis patients. First, stopping ANCA vasculitis. Avacopan therapy was statistically superior in sustaining remission of ANCA vasculitis at 52 weeks compared to the prednisone containing standard of care group. Second, eliminating the need for chronic steroid therapy and the many illnesses associated with that current chronic steroid containing standard of care. In the ADVOCATE trial, avacopan patients achieved a significant reduction in the toxicities and illnesses known to be related to steroids. Third, stopping the accumulated organ damage that comes with this deadly and debilitating disease. Avacopan therapy led to improved kidney function and its use produced a statistically significant improvement in the estimated glomerular filtration rate, a key metric of kidney function. Fourth, an improvement in quality of life. Too many ANCA patients experienced poor quality of life, feeling listless, ill and lacking in anything like normal vitality. From ADVOCATE, there was good news here, too. A statistically significant improvement in clinically validated measurements of quality of life on avacopan therapy. And overall, avacopan also demonstrated a favorable safety result in this serious and life-threatening disease with fewer subjects having fewer numbers of serious adverse events in the avacopan group than in the steroid standard of care group. Results of the ADVOCATE trial were featured in oral plenary sessions during the annual meetings of both the EULAR, or European League Against Rheumatism, and ERA-EDTA, the European Renal Association - European Dialysis and Transplant Association meetings. At ERA-EDTA, for example, Dr. David Jayne from Addenbrooke's Hospital in Cambridge, England, presented some remarkable data on eGFR improvements from the ADVOCATE trial. Slide 5 shows that 80% of ADVOCATE patients who entered the trial had defined renal impairments. In this group, their baseline eGFR, which was well balanced between the two groups, was on average about 45 ml per min. Avacopan therapy improved that eGFR by nearly 8 ml per min over 52 weeks of therapy, which was significantly better than the prednisone containing active comparator group. In fact, the graph on the right depicts the finding that some nephrologists have described to me as remarkable. In the lowest tertile of these patients, those with eGFR less than 30 ml per min at baseline, and in fact, in these individuals, their baseline eGFR was about 21 ml per min, avacopan -- by the way, this baseline of this tertile is only about 5 or 6 ml per min away from being a dialysis candidate. In this group, avacopan therapy boosted their eGFR by almost 14 ml per min over the 52 weeks. This result shows that we have not only met our goal of stabilizing or preserving what kidney function remains in this disease state, and in so doing potentially sparing patients from dialysis but in fact, the data suggests that avacopan may actually improve renal function over time in a very significant way. We believe that avacopan therapy offers new hope for patients suffering from ANCA vasculitis and importantly, could rid of the toxic consequences of the use of a therapy developed more than half a century ago, steroids. There are some other subtle but notable findings from the ADVOCATE study. One of these, for example, is that patients on avacopan therapy performed very well in the second 6 months of the trial. During this period, avacopan was essentially a monotherapy since the standard concomitant background therapies such as cyclophosphamide or rituximab have ceased. The data suggests that avacopan alone may suffice in controlling ANCA vasculitis over time, perhaps without the need for repeated administrations of background immunosuppressant drugs such as rituximab. While more clinical data may be needed to draw firmer conclusions, given the importance of preserving the immune function as we anticipate vaccines in the era of COVID-19, this could be a crucial benefit. We are continuing to move forward with our plans for potential commercial launch, as you will see on Slide 6. Our aim is to be ready to launch soon after FDA approval. We have secured commercial batches of avacopan that we need for launch. We continue to hire well-qualified candidates for key positions, expanding the capabilities of our commercial operation, and we've broadened and deepened our knowledge of the structure and dynamics of the U.S. ANCA vasculitis market through intensive market research. We are also taking appropriate educational opportunities to present data on the disease and on the findings from the ADVOCATE study to clinicians in both nephrology, rheumatology and other relevant disciplines. And we've initiated discussions with key payers to raise their awareness of the current unmet needs and burdens of ANCA vasculitis. We plan to field a specialty force of approximately 60 to 75 people to launch avacopan in the U.S. ANCA vasculitis is a disease that is estimated in the published literature to ravage anywhere between 40,000 and 100,000 people in the U.S. An estimated 4,000 to 9,000 cases alone, new cases are diagnosed each year in the United States. Given the strong value proposition suggested by the ADVOCATE data, we believe that avacopan's utility could extend beyond ANCA vasculitis, making avacopan a pipeline in a drug and with strong patent protection. Given the strong kidney benefit finding in ADVOCATE, we continue to refine our pipeline and expect to introduce avacopan into -- for lupus nephritis into clinical development in the first half of 2021. And as you can see from Slide 7, we expect to report top line data on 2 more indications this year. Indeed, avacopan's ability to stifle the activation of destructive neutrophils by jamming the C5a receptor represents a precision approach that is relevant, not only in kidney diseases, but potentially outside the renal space as well. In fact, the first top line data that we'll report this year is in hidradenitis suppurativa, the disabling skin disorder. HS is driven by neutrophils that are thought to be activated by the C5a receptor. Endovasculitis complement dysregulation is almost universal in HS patients. Our AURORA study, depicted on Slide 8, is a double blinded, placebo-controlled Phase IIb clinical trial of approximately 390 patients with moderate to severe HS, with patients randomized to 1 of 3 arms. The primary endpoint is the hidradenitis suppurativa clinical response score, or HiSCR, after 12 weeks of treatment. We designed the trial to be powered to a registration grade level and decided to slightly over enroll in order to provide some cushion for anticipated COVID-related loss patient follow up. As I mentioned earlier, the COVID crisis has affected us all. We, at CCXI, are no exception, but the impacts have been less grievous for us than for others. Still, while the majority of our subjects had already enrolled in the AURORA trial before the full impact of the pandemic, the summer resurgence of COVID-19 has led to the renewed, if temporary, restrictions of some of the clinical sites. It is, therefore, likely that this will impact somewhat the normal processes of data collection and verification that then lead to database locking and subsequent data analysis. These processes, which are routine to any clinical study, are likely to going to be modestly delayed in AURORA owing to COVID. Thus, we predict that the reporting of the 12-week top line results originally forecast for Q3 is now expected early in Q4. To be clear, no unblinded data are yet in hand. No unblinding or any other unblinded analyses have yet occurred in this trial. We are merely predicting a modest delay in reporting as a consequence of COVID delays. I am often asked how we are dealing with the placebo issue in HS. The primary endpoint assessment known as HiSCR has an unavoidable element of subjectivity. But it is the standard that the FDA expects sponsors to use in determining clinical effects in HS, and ultimately, the standard by which they will assess for approval of a new therapeutic agent. We have been very careful to attempt to minimize subjectivity in HiSCR. For example, we have carefully selected sites which are all in the U.S., allowing a high-touch approach and also in a health care system which tends to keep placebo responses in check. We have engaged in a training program of intensive training, standardization and monitoring. For example, first to training. Suffice it to say, we train, train, train, and principal investigators had to pass a certification test on HiSCR to qualify to enroll patients. Standardization. We developed and mandated the use of standardized records and continuous worksheets across the clinical sites. And finally, monitoring. During the blinded data collection phase, our resident medical monitor scans nearly daily for anomalies in the data collection and is in frequent contact with the investigator, also who is also still blinded, and they jointly resolve any recording anomalies using our standard protocol. In all of these ways and more, we are scrupulously attempting to control what we can control to reduce variability and placebo response in the HiSCR assessment. Our other current avacopan trial is in another kidney indication, C3 glomerulopathy. C3G is a rare and devastating kidney disease. There is no FDA-approved therapy for C3G. ACCOLADE is a randomized blinded controlled trial, the design of which is shown on Slide 9. The trial is unique in many ways, including that we will collect and carefully measure kidney biopsy data as a measure of efficacy and this will be coupled with other traditional markers of kidney function. Many experts suggest that we are already in possession of the largest and most comprehensive data set, albeit still blinded, for C3G yet assembled for this life-threatening illness. We aim to announce top line data for the ACCOLADE trial by the end of this year. Innovation in life sciences does not come up without its setbacks, and ours came with the disappointing top line results from our LUMINA-1 trial of CCX140 in focal segmental glomerular sclerosis. We don't see a way forward for CCX140 and FSGS. In the interest of biomedical innovation and completion, we will report more detailed LUMINA-1 as well as the smaller LUMINA-2 data sets in due course. On a brighter note, see Slide 10. And also in the second quarter, we announced that we have identified an orally administered checkpoint inhibitor, CCX559, formerly referred to as CCX6559, which we plan to advance into clinical development in the first half of this coming year, 2021. Data presented in June at the Annual Meeting of the American Association for Cancer Research showed that our optimized checkpoint inhibitors led to a marked inhibition of the PD-1/PD-L1 interaction in vitro, and importantly, produced potent anti-tumor effects in vivo in pharmacological models. We believe that CCX559 has the potential to be used alone or in combination with antibody therapy or other oncology therapies. Our small molecule checkpoint inhibitor is designed to address at least 2 limitations of current antibody checkpoint inhibitor therapy: One, a small molecule may achieve better penetration of the tumor microenvironment, where some tumors are currently resistant to antibody therapy; two, a small molecule brings the convenience of a flexible dosing capability. Before I turn the call over to Susan Kanaya for our financial results, let me add that during the quarter, we have further strengthened our balance sheet with a follow-on offering that yielded net proceeds of almost $326 million. We report today over $0.5 billion in cash and cash equivalents on the balance sheet as of the end of the second quarter. This financial strength supplies many important degrees of freedom in pursuing our ultimate mission. We believe that we have the resources we need with the potential commercial launch of avacopan in ANCA vasculitis and beyond. We can pursue the simultaneous further development of avacopan and other high-need, high-value clinical indications as well as additional formulations. And we can follow the science and invest in other novel and highly innovative drug candidates such as our orally administered checkpoint inhibitor, CCX559. My warmest thanks to all my colleagues at ChemoCentryx, especially in these difficult times, for their tireless work in advancing us to this stage and to the many clinicians involved in our clinical trials. And I thank especially the patients and their families who have devoted so much to our controlled, blinded trials, not knowing if an active agent was part of their personal plan, but doing so for the benefit of the community as a whole. Susan? -------------------------------------------------------------------------------- Susan M. Kanaya, ChemoCentryx, Inc. - Executive VP, Chief Financial & Administrative Officer and Secretary [4] -------------------------------------------------------------------------------- Thank you, Tom. Our second quarter 2020 financial results were included in our press release today and are summarized on Slide 11. Revenue was $49.4 million for the second quarter compared to $7.2 million for the same period in 2019. The increase in total revenue was primarily due to the acceleration of revenue recognition associated with the CCX140 agreement with Vifor. Following the decision to discontinue development of CCX140 in FSGS, $47.2 million of deferred revenue was recognized as contract revenue. Research and development expenses were $18.8 million for the second quarter of 2020 compared to $17.6 million in the same quarter last year. This increase was primarily due to patient enrollment in the avacopan AURORA trial in patients with hidradenitis suppurativa, professional fees associated with the preparation of our avacopan NDA for ANCA-associated vasculitis and higher drug development or drug discovery expenses, including those associated with CCX559, our orally administered small molecule PD-L1 inhibitor. These increases were partly offset by core expenses due to the full enrollment of CCX140 LUMINA-1 trial in 2019. General and administrative expenses were $10.3 million for the second quarter compared to $5.6 million in the same quarter last year. The increase was primarily due to higher employee-related expenses, including those associated with our commercialization planning efforts and higher professional fees. Net income for the second quarter was $20.3 million compared with a net loss of $15.2 million in the same quarter of 2019. Total shares outstanding at June 30, 2020, were approximately 68.8 million shares. Lastly, we closed the quarter with $504.6 million in reported cash, cash equivalents and investments, including the $325.7 million in net proceeds from the June 2020 equity follow-on offering of our common stock. Tom? -------------------------------------------------------------------------------- Thomas J. Schall, ChemoCentryx, Inc. - Founder, President, CEO & Chairman [5] -------------------------------------------------------------------------------- Thank you, Susan. To summarize, as you can see on Slide 12, we have filed an NDA for avacopan in ANCA vasculitis and our partner, Vifor, expects to file an MAA in Europe by the end of 2020. We continue to build our commercial capability. We are on track to release top line results from 2 further clinical trials of avacopan in patients with HS by early Q4 and with C3G by the end of the year. We are preparing for our next cycle of pipeline advancements, and we anticipate initiating clinical programs in the first half of 2021 for our orally administered checkpoint inhibitor, CCX559, as well as for avacopan in patients with lupus nephritis. We have attracted the financial resources that we need with now over $0.5 billion on the balance sheet at the end of Q2 to drive us to the next phase of our growth as we seek to become a fully integrated pharmaceutical enterprise that brings fundamentally new medicines to patients that need them most. This ChemoCentryx enterprise is built on biomedical innovation, on determination, on integrity and on purposeful resilience. With science and data illuminating the path ahead, I look forward into a future bathed with the bright light of hope and prosperity. With that, I will now turn the call back over to the operator, and we look forward to your questions. Operator? ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) And our first question comes from the line of Steve Seedhouse with Raymond James. -------------------------------------------------------------------------------- Steven James Seedhouse, Raymond James & Associates, Inc., Research Division - Research Analyst [2] -------------------------------------------------------------------------------- My question is on the analysis of AURORA, given the different moving parts you highlighted on the call. So I was hoping you could quantify the net impact of COVID, any discontinuations or patients missing their final visit versus over enrolling the study and where it leaves you really with respect to study power. And also wondering, is the primary analysis here an ITT analysis or a per protocol analysis on those patients that haven't deviated from protocol? And then last, how are you treating the patients who may have missed their final study visit because of COVID impact? Are those responses imputed from prior measurements like LCOF (sic) [LOCF] or are they just censored? -------------------------------------------------------------------------------- Thomas J. Schall, ChemoCentryx, Inc. - Founder, President, CEO & Chairman [3] -------------------------------------------------------------------------------- Yes. Great question, Steve. So it is -- all of our analyses are intended as ITT because, as I said, we made this trial kind of a registration grade trial since it's -- but even though it's a "Phase II or Phase IIb trial." So our intention will be to report the stats as intent-to-treat. We will obviously do and have in our stats plan prespecified various kinds of per protocol analyses. So those data will be informative and meaningful as well. Currently, we've been -- and obviously, we and others have been really careful in documenting the effects of COVID on patients, particularly for primary endpoint determination, working very carefully with the FDA and documenting in real time what we're doing with those folks. At the moment, we do not intend the last observation carry forward necessarily for those that missed their 12-week visit, owing to COVID. But they -- certainly, we'll capture all the data we can from those folks, particularly if they're still in the trial and are measured thereafter. So those might be eliminating data as well. But I think the good news is the first part of your question, which is the, I think, probably the most important part. Although, yes, it is clear that dropouts and some lost data owing to COVID is going to be higher than what we and others might have modeled, the fortunate news is I don't think it's going to -- it's not going to materially impair our ability to still have very good power in this trial. So that's, I think, for us, the excellent news. We really made a big trial with big groups. It was very highly powered to detect the differences that, historically, we might be led to expect and certainly highly powered to detect statistical differences between the groups. So even a doubling, if you will, and I'm not saying that's the number, but even if we had twice the number of dropouts or lost data, at 12 weeks, I think we still got really good power discrimination. So I fundamentally believe that we'll be able to return a meaningful and clean result from the 12-week data even with the fact that COVID has messed with some of that data a little bit. And really, the biggest impact for us is a slight delay as we get into the sites and do our data verification and collection process. -------------------------------------------------------------------------------- Operator [4] -------------------------------------------------------------------------------- And our next question comes from the line of Dae Gon Ha with BTIG. -------------------------------------------------------------------------------- Dae Gon Ha, BTIG, LLC, Research Division - VP & Biotechnology Analyst [5] -------------------------------------------------------------------------------- Congrats on all the progress. So Tom, if we can go to AURORA protocol, I just wanted to ask, can you remind us what the protocol allows in terms of antibiotic usage? Because, I mean, I guess, PIONEER 1 and 2, they did have a little bit of that antibiotic usage versus nonantibiotic usage. And as we look forward in terms of the regulatory front, can you update us on your latest thought process with regards to maybe orphan drug designation or conditional filing/AA or accelerated approval based on AURORA data alone? -------------------------------------------------------------------------------- Thomas J. Schall, ChemoCentryx, Inc. - Founder, President, CEO & Chairman [6] -------------------------------------------------------------------------------- Sure. Thank you, Dae Gon. Without going into all the details on the antibiotic use, I can tell you that we're much closer to the PIONEER studies than we were to any other studies. We realized that concomitant antibiotic use can be a confounding feature in the short term in ascribing effects to the HiSCR. And so we were pretty careful about looking back at what had happened in PIONEER 1 and 2 and trying to adhere to those guidelines and also making sure that to the extent possible, we didn't have imbalances in antibiotic uses between the group. So again, I think we've been very cognizant of that as a complicating feature and trying to avoid it as a complicating factor in our interpretation. Back to the regulatory strategy. So it's the history is clear on what's gone before. We're evaluating the Hurley Stage II/III patient population as did the PIONEER studies, which were the studies, as people may know, are the only Phase III pivotal trials that led to, so far, the single loan registration of a drug in this space, that for adalimumab, the anti-TNF drug, Humira. And we want to try to avail ourselves as much as we can from information from that precedent. So interestingly, that sponsor got an orphan drug designation for Hurley Stage II/III because that patient population is under 200,000 people in the U.S. and that is still the case. So we have -- we've been attempting and continue to work on our orphan drug designation. We don't yet have that designation yet at ChemoCentryx, but there is precedent and we've been certainly working on that continuously. So we've yet to know if we get that orphan drug designation. But again, there is precedent for it. We fundamentally believe that Hurley Stage II/III patients are still fewer than 200,000 in the United States at this juncture. So with all of that in mind, getting back to one of the main points of the question. We set up this trial to be big enough and highly powered enough where if we got really good data with a highly differentiated agent, particularly one, which at that time, was not yet in registration for another indication but we had confidence that it would be, and that's what -- that has come to pass, that we are filed, we actually have a filing under review for registration of avacopan in ANCA vasculitis. We were -- we have been hopeful that with strong data, we could have an interesting discussion with the FDA about potentially a conditional registration or at least how to get to an accelerated path to registration, again, with strong data. So again, without going into a lot of details, and certainly, I do not at all speak for the agency and the agency will just have to see what data we have, as we will, and then we'll discuss from there. I think it's really great news, though, that there's a huge -- it seems to me a huge demand, not just for new therapy in HS, but new orally active therapy. And so again, even COVID notwithstanding, but certainly prior to COVID, we really enrolled this study very rapidly. And I think that, again, speaks to the eagerness of folks in this community to have a new therapy options. So we'll see how strong the data is. We'll have discussions with the agency. And in the light of -- if data are positive, we will do everything that we possibly can to bring the drug to registration in this indication as quickly as possible. -------------------------------------------------------------------------------- Operator [7] -------------------------------------------------------------------------------- And our next question comes from the line of Michelle Gilson with Canaccord. -------------------------------------------------------------------------------- Michelle Lim Gilson, Canaccord Genuity Corp., Research Division - Analyst [8] -------------------------------------------------------------------------------- Congratulations on the progress this quarter. I was hoping you could expand a little bit on what might be considered a clinically significant result in HS. Or perhaps what is the strong enough result that would give you confidence to move the program forward, either to registration or to registration-enabling studies? And then could you also help us understand what you might report in the fourth quarter as far as data goes? Maybe what per protocol analyses you might present? And if you specifically will be breaking out Humira failures? And maybe remind us of the powering of the study, if you don't mind as well. -------------------------------------------------------------------------------- Thomas J. Schall, ChemoCentryx, Inc. - Founder, President, CEO & Chairman [9] -------------------------------------------------------------------------------- Sure. So it's -- all of those are really excellent questions, Michelle. Thank you for them. We have so little precedent in the world of hidradenitis suppurativa in controlled trials that are informative to really help us guide some of those answers. I'll take some guesses. And certainly, we have, again, for lack of a better term, an endpoint, which is a strong tool, but not a very sharp tool. It's not a precise tool. And the element of variability and subjectivity again makes it a little bit difficult to always try to compare apples-to-apples, particularly when there's only been 1 or 2 apples in the bin before. So let me say this, that as a general rule, anything that gets me to a clear answer about a next step, to me, is a success. So if we see clear separation between the groups, and if some of the secondaries look also supportive, and we say to ourselves, well, it's clear that we're having a clinical effect, indeed, a clinical benefit, that's a good answer. Hopefully, we won't get the other kind of clear answer, which is there's nothing here, but we've done our best. But again, even a good, clean answer on that side of the equation just allows us to focus on other areas that we can put our time, effort and treasure. So getting back to -- we always like -- people always like to say, well, what would an interesting difference be. For me, any statistical separation that's significant, I will say, let's look very carefully at that. And with this kind of instrument, careful as we are to use it as carefully as we can, that probably is meaningful. So we would, at minimum, like to see a statistical separation, obviously, with the HiSCR. And the only precedent we have about what's good for registration, what's strong enough for registration is what we've seen before in the one drug that's been registered. And somewhere a delta between 20% and 30%, 25% to 30%, with obviously the bigger number going to the new agents, in that case, it was adalimumab over the background therapy, that's the one regulatory precedent we have for registration. So I think it could be argued that something approaching that is pretty strong data since that's all we have so far. And again, we'll just have to see how the agency thinks about these things. It's pretty clear they like -- they want to stay with HiSCR. They've been very clear to the community about that. So that's what we're using. We will report essentially -- and you'll recall in this trial, we've committed to talking about the 12-week primary endpoint data. We also have some additional open -- it's open-label, but blinded to dose a continued dosing for 24 weeks. So we've got some special challenges here in trying to preserve the integrity of this data set, while presenting top line data, which will essentially be aggregate data between the groups that will tell us whether there is a difference between any of the dose groups in the placebo. So definitely, we'll have that information, and that will be evaluable and in fact, will tell us whether we achieved the primary endpoint of a statistical separation between drug-taking folks and placebo-taking folks. The powering on that was established quite early on, and I think we've talked a little bit about it. Originally, we were powered to see about a 90 -- I'm sorry, 90% powered or greater to see the historical standard of a 20% difference. Again, I don't think even with all of the challenges of COVID, we probably have something pretty good, still very good power in that way. So I'm not worried about a material de powering of the study in any way. So I think, again, we'll get a clean answer. But the whole point is if we get a nice strong result on the primary endpoint, we want to have a data set of preserved integrity so that when we take the follow-up phase, we can use the entirety of the data with a discussion with the FDA and again, ask how could this support a registration or inform a registration. So that's what we'll be talking about sometime in Q4 when we bring the data forward. -------------------------------------------------------------------------------- Operator [10] -------------------------------------------------------------------------------- And our next question comes from the line of Ted Tenthoff with Piper Sandler. -------------------------------------------------------------------------------- Edward Andrew Tenthoff, Piper Sandler & Co., Research Division - MD & Senior Research Analyst [11] -------------------------------------------------------------------------------- Congrats on the success. It has been really exciting year. So I'm trying to understand sort of how the data, hoping that it's positive from HS and/or C3G, could impact AAV approval? So it would be supplemental filings, but would you need to wait for the AAV approval to file for the other indications? I'm just trying to sort of understand the sequence of that with respect to regulatory filings. -------------------------------------------------------------------------------- Thomas J. Schall, ChemoCentryx, Inc. - Founder, President, CEO & Chairman [12] -------------------------------------------------------------------------------- Well, Ted, thank you. I hesitate to opine on regulatory details since my regulatory expert is not on the phone today. We have an excellent team at ChemoCentryx who does this work. But my understanding is that probably, while each filing and, of course, the background materials in each filing, such as the manufacturing and chemistry controls, et cetera, obviously, the cumulative databases in other ways, safety, et cetera, those support any individual filing, that probably each indication would be taken in its own turn. So in point of fact, from a pragmatic aspect, ANCA vasculitis filing will be moving along on the calendar already in its own way, in its own pace, and we probably have that process well underway by the time the other filings got put in. And again, without being entirely familiar with the details because each of these indications is also at separate divisions within the FDA, I presume that those divisions, while obviously cooperating extensively on the materials, would, of course, have their own process. So I think they're kind of quasi independence, but of course, supported by the core technical information. -------------------------------------------------------------------------------- Edward Andrew Tenthoff, Piper Sandler & Co., Research Division - MD & Senior Research Analyst [13] -------------------------------------------------------------------------------- Well, again, it's a high quality problem, hopefully. -------------------------------------------------------------------------------- Thomas J. Schall, ChemoCentryx, Inc. - Founder, President, CEO & Chairman [14] -------------------------------------------------------------------------------- One hopes. Thank you. -------------------------------------------------------------------------------- Edward Andrew Tenthoff, Piper Sandler & Co., Research Division - MD & Senior Research Analyst [15] -------------------------------------------------------------------------------- So looking forward to the data guys. -------------------------------------------------------------------------------- Operator [16] -------------------------------------------------------------------------------- And our next question comes from the line of Yanan Zhu with Wells Fargo Security (sic) [Wells Fargo Securities]. -------------------------------------------------------------------------------- Yanan Zhu, Wells Fargo Securities, LLC, Research Division - Associate Analyst [17] -------------------------------------------------------------------------------- Regarding the HS study design, there is a 10 mg BID or mind -- kind of a mid-dose arm. Just curious what -- why was -- because the other studies didn't include any dose arms lower than 30 mg BID. So what's the reason of including that arm and what we might learn from that arm in the HS study? And also, if you could -- yes, yes. So I'll take that. I have a follow-up after that as well. -------------------------------------------------------------------------------- Thomas J. Schall, ChemoCentryx, Inc. - Founder, President, CEO & Chairman [18] -------------------------------------------------------------------------------- Sure, of course. In point of fact, in one of our Phase II development programs, we did include a 10 mg and a 30 mg dose against no avacopan, all of which was on the background therapy of standard of care. So it was kind of every group got high dose glucocorticoids in the daily setting, in addition to the combination of either cyclophosphamide or rituximab. So the classical glucocorticoid plus x protocol, where x is either cyclophosphamide or rituximab. So every individual in that Phase II study got that. And then we layered on either 10 mg dose or the 30 mg dose. And while that study was mostly a safety study to see if there would be any additional safety burdens that avacopan might impose on people, should the drug be used, not that we're seeking to use it that way, but should someone ever use avacopan in addition to what they've been doing for all these years, and thankfully, there was no safety burden that avacopan brought to that party, we were able to look at 10 and 30 mg. Again, the study was not powered for efficacy. But there were hints that what we saw with the active effective 30 mg dose in the other trials was present and apparent even in that setting, where, of course, they were getting standard of care. So there was that to deal with in background. Whereas the 10 mg dose was not quite as potent. So we do have some experience. And of course, we have all of our calculations, both from pharmacological studies that are off clinical and in the other healthy human volunteer studies to suggest that, at least for the target that we're going for of pharmacological coverage, essentially pharmacological inertness, if you will, of the receptor at trough levels of the drug, the 10 mg dose falls short of that. So we put it into this study as one of the arms. And essentially, this being a new indication outside the space that we were in before, we wanted to be able to speak to any questions that regulators or others might have that would be along the lines of, well, we see that you have some effect at this 30 mg dose. Is that really -- could you go lower and still see an effect in this indication? So we just built that in. And if nothing else, that will inform the data set. We don't think that 10 mg dose in that way will have the same pharmacological coverage at all. And so it would be gratifying if the dose response could be seen. Again, given the limitations of HiSCR, that's always a question. But we wanted to be able to demonstrate to regulators that we had explored dosing at scale in this particular indication. So that's why we put it in the trial, as we did. -------------------------------------------------------------------------------- Yanan Zhu, Wells Fargo Securities, LLC, Research Division - Associate Analyst [19] -------------------------------------------------------------------------------- Got it. That's very helpful. And then the remaining question is regarding any safety implication from the HS study. More specifically, I think for the ANCA vasculitis study, avacopan is used on top of cyclophosphamide or rituximab. So it's the -- safety-wise, it's a little hard to see clearly safety profile because of the background therapy here. I think there is a very good opportunity to demonstrate safety and its large data set. So could you share your thoughts on, in addition to efficacy, what kind of safety leverage will this provide to the entire avacopan pipeline? -------------------------------------------------------------------------------- Thomas J. Schall, ChemoCentryx, Inc. - Founder, President, CEO & Chairman [20] -------------------------------------------------------------------------------- Yes, very perceptive question. And you're quite right. In the ANCA patient population, they're on background therapy for their disease. They're on also an amazing number, typically an amazing number of concomitant medications to control other complications of the therapy, prophylaxis for Pneumocystis jirovecii as a consequence of being under high doses of glucocorticoids and/or cyclophosphamide and rituximab. So that has its own problem, that conmed. They're trying to control their incipient diabetes and some of the bone problems with conmeds. They're really, really a challenged patient population. And one hopes going back to avacopan in ANCA vasculitis, by removing some of the need for these broadly immunosuppressive therapies, we also get rid of some of these nasty conmeds that give them so many AEs and SAEs. But even there in ANCA, we could show 40% fewer number of severe AEs in the avacopan group versus the prednisone standard of care group. So there is, seems to be, at many levels, very good safety advantages to using avacopan. But again, we'll let regulators and other sift through the data sets, and I won't say any more about that since it's under a filing right now. But it is pretty clear to us that HS population is, by and large, notwithstanding the fact that they have this really debilitating illness, and that causes them a lot of discomfort and pain in many areas of life physically and emotionally, they are, by and large, not under the burden of quite so many concomitant medications. And the safety database, although still blinded, the suggestion is that we have far fewer, across the board, safety events just in this patient population, full stop. And again, even in the blinded data set, nothing that seems out of the ordinary for this patient population. So I think when the data come out, it will certainly add to and fundamentally enhance the picture of safety around avacopan, which we believe, based on evidence to date, both preclinical, off clinical, number of species and humans, both healthy and with ANCA vasculitis population, we believe will be a very supportive data package on safety as well. So we hope it will just further enhance that package. And if there are any outstanding questions that come out of ANCA vasculitis, which in a complex patient population, there always could be, but if there are any, we've got an equally large data set in hidradenitis suppurativa to check whether or not any of those kind of events are evident in HS. So I think it's going to be a real benefit to our overall packaging profile. -------------------------------------------------------------------------------- Operator [21] -------------------------------------------------------------------------------- Our next question comes from the line of Joseph Schwartz with SVB Leerink. -------------------------------------------------------------------------------- Joseph Patrick Schwartz, SVB Leerink LLC, Research Division - MD of Rare Diseases & Senior Research Analyst [22] -------------------------------------------------------------------------------- Congrats on the progress as well. I was wondering if you could categorize or characterize your payer interactions for us in terms of how well you're finding that they appreciate the various sources of value that avacopan could deliver in terms of the total cost of patient management in AAV, including a lot of the safety liabilities that you were just alluding to and the range of efficacy benefits. Are you finding that anything resonates more or less? And how are you thinking about incorporating the feedback you've obtained from payers to date in your ultimate pricing decision? -------------------------------------------------------------------------------- Thomas J. Schall, ChemoCentryx, Inc. - Founder, President, CEO & Chairman [23] -------------------------------------------------------------------------------- It's a great question. We -- again, without going into too many details and my commercial team are going to be presenting a lot of information at health economics conferences as we get closer to launch. And so those will be very interesting things to watch. But I'm going to say that these interactions to date have been -- we've been very pleased with how much payers actually get it in this particular orphan indication. They totally understand -- maybe totally is a bit too strong, but let's just say that we've been impressed at how much understanding there is out there about the true cost of this kind of disease. You can go out and do the big, big ticket stuff like dialysis. And so the kidney data was something that was, again, very pleasantly a factor in some of those conversations so far. That's obvious, right? I mean end-stage renal disease will bankrupt our Medicare system if we don't do something about it overall. It's about 9% of the total Medicare budget, far more than the entirety of the NIH budget for all medical -- basic medical research, or certainly more than an NIH budget just for end-stage renal disease, forget everything that leads up to it. But payers, even if we have to take that out of the equation, which is not -- which is a big factor not to take off, but they understand the hospitalizations are -- which are just a fraction of this big pie of ANCA vasculitis care. There's an astonishing number of hospitalizations per year in the U.S. on the order of, what, 13,000 or 14,000. They're not short. It's not a day or so. It's 7 to 11 days and cost ranging -- just the cost associated with the ANCA codes and the diagnosis and hospitalizations ranging from $100,000 to $150,000. And this is just part, this is a fraction of the total cost. They get that things like glucocorticoids maybe are cheap in the bottle, but they're super expensive to use. They get all the complications and the safety consequences and the absolute diminution of quality of life and the pharmacoeconomics of having people out of work, out of the -- in the health care system all the time. So I would say this is one of those things that you always go into a little bit fearful of the unknown. But so far, hats off to the payers. They've been a lot more knowledgeable and a lot more on message and very receptive to the data we're presenting. So I think that's been an encouraging part of the journey so far, and we'll have more to say about those details a little bit later on in the process. -------------------------------------------------------------------------------- Operator [24] -------------------------------------------------------------------------------- And our next question comes from the line of Anupam Rama with JPMorgan. -------------------------------------------------------------------------------- Tessa Thomas Romero, JPMorgan Chase & Co, Research Division - Associate [25] -------------------------------------------------------------------------------- This is Tess on for Anupam. So on C3G, there is some competitive activity in the space. What are your thoughts around differentiation here for avacopan C5 inhibition from a mechanistic perspective? And then what is the latest thinking about epidemiology for C3G, where I think the literature can be somewhat variable? -------------------------------------------------------------------------------- Thomas J. Schall, ChemoCentryx, Inc. - Founder, President, CEO & Chairman [26] -------------------------------------------------------------------------------- Yes, indeed. The literature is really variable. We have a lot of discussions even within the enterprise about what is the most reliable idea, both incidence and prevalence, just in the U.S., let alone anywhere else in the world. It's a rare disease, that much is true. There's no question. I don't know if it's quite as ultrarare as some of the literature suggest. My own inclination is maybe not. So I think that the treatable patient population in the United States is certainly accessible between -- probably in the low number of thousands and that's kind of what we're looking at. But it's hard to know. It is hard to know. Having said that, since there is nothing available for these people and since they go through this really dismal progression of being young people, having end-stage renal disease going into dialysis, maybe getting a transplant usually from mom or dad, but typically mom, having that transplant fail within a few short years from the same underlying condition and going back in dialysis, I mean this is a bit -- a really bad, grim cycle and very expensive, obviously, for the patients, their families and then, of course, for the health care system. So it's definitely very worthwhile approaching this problem and approaching it from a couple of different angles. I fundamentally hope that we can all find, even in a rare disease like that, I think any approach that wins or any couple of approaches that wins is real progress, and it will help everybody. Because frankly, C3 glomerulopathy, again, one of its mysteries since it's so rare, is it really one disorder or how many disorders is it? I mean we keep collapsing different features of kidney disease with complement dysregulation under new titles. And C3G is the latest one. I just think of it, generally speaking, as a complement regulated -- I'm sorry, complement dysregulated glomerulopathy. So as to differentiation, no one else is attacking what I think is the fundamental question is like, why does the kidney develop this massive inflammatory and eventually self-destructive feature at the level of biopsy? And it's not just that you have all these protein deposits in the part of C3G that used to be called dense deposit disease. It's not just sort of gunking up the glomeruli. I mean there is active destruction, I think. And so we know that complement is dysregulated. There is ample evidence for C5a receptor. C5a is more difficult, in my opinion, to detect, either at the level of histochemistry or even with soluble detection in the periphery. But C5b-9 is definitely present in these patients. So there's lots of evidence of terminal complement activation leading to what would be a C5a presence, and we believe it's there in the kidney as well fundamentally. So we're the only game in town for stopping what we think is neutrophil-mediated destruction or other granular sites mediating some of this destruction. Other approaches, yes, there are some, and there's some in the complement intervention space. I think that our orally active drug validated at the level of another very difficult and complicated disease involving the kidneys, ANCA vasculitis and validated robustly has to derisk our approach somewhat. And the question will be is all C3G the same kind of disorder? Or are there going to be subsets that will be more amenable to treatment with one modality versus another? And that will play out, I think, over this next year. But make no mistake. As you know, some of these other approaches have been frustrated, and it's really difficult to understand what's happening in this disorder. It's one of the reasons that when we set out, we intentionally decided to do something different. And we said, look, C3G is -- you can have presumptive C3G, and then we do a lot of biopsy work in this area. So let's take biopsies. Let's confirm that you have C3G at the level of biopsy at least and then let's look again at 6 months. That's a real investment on the part of patients and clinicians. But there's real good evidence that you can -- if you get a histological improvement in and around the glomerulus, that matters. And that may well ultimately then fall into line with reduction in proteinuria, which is sustained, as well as an improvement over time in eGFR. And really, by bringing all these features together, including this biopsy endpoint, we think we'll be able, for the first time in the history of this disorder, to marry all these features together from a really good blinded data set collected, blinded, evaluated, in the case of histology, by a central laboratory, and this should be very powerful. So I think we're going to have a lot to offer in terms of just knowledge. And I hope -- I'm very sanguine and indeed bullish about therapeutic benefit for some of these people with avacopan. -------------------------------------------------------------------------------- Operator [27] -------------------------------------------------------------------------------- And our next question comes from the line of Ed White with H.C. Wainwright. -------------------------------------------------------------------------------- Edward Patrick White, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [28] -------------------------------------------------------------------------------- So just a couple of questions. First, on ACCOLADE. You're expecting the top line data by the end of the year. Is that only Stratum 1? Or will you -- we be seeing some Stratum 2 data as well? -------------------------------------------------------------------------------- Thomas J. Schall, ChemoCentryx, Inc. - Founder, President, CEO & Chairman [29] -------------------------------------------------------------------------------- That's, again, a very insightful question, Ed. Thank you very much for bringing that up. So I -- it's notable when we talk about the ACCOLADE trial design, and I think we alluded to that on one of the slides. I reminded people again of this biopsy. We originally -- there's no approved therapy, so there's no regulatory path here, by the way, and I think most people understand that. When we set up this trial, there was some really good literature at the time and this is by way of Stratum 1 and Stratum 2, so that people understand this a little bit better. There was good literature that suggested that if you had bonafide C3 glomerulopathy, i.e., active lesions and destruction in your kidney glomeruli, you are probably likely also to have a biomarker of high levels of C5b-9 or soluble MAC complex in your periphery, in your blood, your circulation. And this was a biomarker that was a stable, fairly easy to measure because C5b-9 is stable, and there are good assays for it. And so it would kind of made good sense, right? You've got a complement dysregulated kidney disease, and there's a nice biomarker in the blood. So maybe that's going to be helpful for diagnosis and knowing whether we're having a therapeutic benefit. So originally, the trial was designed just for those people that had a relatively high level of C5b-9 in the periphery. As we got the trial design launched and consulted with FDA, there were some other papers that came out that had a kind of opposite point of view, which said, basically said, actually, all the actions in the kidney, don't worry about what's happening in the blood because you could have C3G and have fairly low levels of complement activation markers in the blood, including C5b-9. So what we decided to do is actually get that second stratum, which is low soluble MAC complex, in the trial. So that in a way we could definitively answer the question. And after all, if we had the Stratum 1 trial and got a great result, the next question would be, we'll do another trial in people with low soluble MAC complex and see if you get the same result. And so we just thought we'd do it all in one. Now why do I tell you all these things? The fact is, when you have presumptive C3G and you then -- and that's what we do. We look for presumptive C3G. We screen people. We then next take -- we next take their measurements on soluble MAC complex, low or high. And then the last step we do is biopsy prove because that's the most invasive step. And so by -- at least by the standards of this trial design, which was done with consultation with the leading nephrologists in the world in this area, what we know is this. It seems that the original hypothesis is more correct. If you have biopsy proven C3 glomerulopathy, you are likely to present clinically with this marker of high soluble MAC complex. And in fact, if you have low soluble MAC complex, even if you clinically, yet presumptive that you have C3G, you convert at the level of biopsy which is the last step at a much smaller rate. So all of that is by way of saying, Ed, we will have virtually all of the target of the original Stratum 1. In the Stratum 2, there will be less data only because far fewer people actually have C3G when they have low soluble MAC complex. That's what our trial design data suggests so far. We haven't unblinded anything other than knowing that they simply don't come out on biopsy with C3G anywhere near as frequently when they have low soluble MAC. So we will put out all the data we have in the world, which, again, is probably the bulk of the data that we had from clinical trials on C3G. And we've already answered, I think, or at least provided new information on a fundamental clinical question, which was the controversy between soluble MAC, high or low, does that equate to C3G in the kidney? That's a level of biopsy, the level of biopsy, the high soluble MAC complex is much more correlated with C3G. So I won't give you the detailed numbers yet, but we'll have all the data when we talk about that, at least for the 6-month primary endpoint. -------------------------------------------------------------------------------- Edward Patrick White, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [30] -------------------------------------------------------------------------------- Great. Fantastic. And maybe just a far simpler question with a short answer. So with the expectations of 60 to 75 specialty field sales force, I'm just wondering where you are in the hiring. -------------------------------------------------------------------------------- Thomas J. Schall, ChemoCentryx, Inc. - Founder, President, CEO & Chairman [31] -------------------------------------------------------------------------------- We're doing, I think, a great job of the hiring. Again, we've really got a great commercial organization; young, dynamic, but quite experienced and a lot of product experience and launches under their belt. So the infrastructure at the executive team level is very much in place. And now we're just bringing on accordingly and in the appropriate time, the actual sales reps and medical science liaisons to bring them in with the appropriate timing. But the whole hiring plan is totally in effect, and we're well on our way to bringing in many of those people that will be involved in that field force. -------------------------------------------------------------------------------- Operator [32] -------------------------------------------------------------------------------- I am now showing no further questions and would like to turn the call back to Thomas Schall for closing remarks. -------------------------------------------------------------------------------- Thomas J. Schall, ChemoCentryx, Inc. - Founder, President, CEO & Chairman [33] -------------------------------------------------------------------------------- Well, thank you, operator. And again, I wish to thank everyone who's been on the call today. Again, it's been a very exciting, although challenging year for many of us in the industry. But we're making good progress. I very look forward to updating you as we execute further on these 2020 plans. And again, thank you all for your time and attention today. You may now disconnect. Bye-bye.